Market is crashing due to number of reasons such as corona virus, Crude oil crisis and highly inflated share market with very high valuations.
With the outbreak of corona virus 2 months ago in China and gradually growing in different parts of the world has led to a global health crisis, people should be aware it is not a financial crisis unlike 2008 rather it is a health crisis which has forced nations to block their borders and stop people from different countries into entering their countries.
This virus has affected mostly China, Iran, Europe, and America. This disease has created havoc and the death rate due to this disease is increasing most death of 3000 has occurred in China and thereafter Italy is worst affected with 1000 deaths.
So this health crisis is one of the reason for stock market crash.
Crude oil crisis
Within a weeks time oils prices has battered by 23% which has happened for the first time, this price fall is due to weaker demand in oils as the travels has been mostly blocked due to corona virus havoc.
Another reason led to a global oil price war is Saudi Arabia and the United Arab Emirates promised to boost production going forward and did not want to get controlled globally stating they have their own resources, while Russia said that it could also significantly increase its oil output.
Over the last few weeks, price war started between Russia and Saudi Arabia as they failed to achieve an settlement on price levels. This has led to a worldwide oil crisis and has created turmoil in the stock market.
With rising supply in future, oil is now in super demand, which means that future prices will be more than the present cost. This occurs when a provide glut threatens to overload storage capability, driving up prices for producers and incentivising them to promote extra at a reduction now.
High Valuation of Index
It has been noticed that Sensex has reached highest levels but the small caps and mid caps was not progressing accordingly, Mid caps and Small cap index was not moving this was a hint that Sensex is moving without carrying the macros, the rally in nifty 50 and Sensex was largely due to large cap stocks.
Since 2018 Mid caps and small cap has struggled and has forced retail investors to loose a lot of money, and the gradual strong policies of Government has led the chor companies to be kicked out of the system like Vakrangee, Yes bank, Gitanjali Gems and Manpasand Beverages.
This policies advent has led to massive corrections at mid and small cap level, so until mid and small cap does not increase till then increase in sensex does not hold good. As we can see that Mid cap and small cap has fallen 25% and 50% respectively below it highest level in January 2018.
The rally which we have seen in the recent past in nifty is due to large caps only, so we have to wait until all three indices perform and we have a stable Macros.